ONGC seeking payments in oil from Venezuela to clear sales dues

DEBJIT CHAKRABORTY and ABHISHEK SHANKER

NEW DELHI (Bloomberg) -- India’s Oil and Natural Gas Corp. is in discussions to take $535 million worth of crude in lieu of cash for its share of sales from a Venezuelan oilfield.

The company’s overseas unit, ONGC Videsh Ltd., owns 40% of the San Cristobal field and invested about $190 million in the project in 2008. State-run Petroleos de Venezuela S.A., or PDVSA, holds the remaining stake. A deal to pay the Indian producer its share of revenue from the field in crude should be reached by March, according to Narendra Kumar Verma, the company’s managing director.

“PDVSA will authorize oil inventory from the project to be taken out -- that’s the model we are working on,” Verma said in an interview in New Delhi, where the parent company is based. ONGC will either ship the crude to India or market it elsewhere, Verma said.

The cash-strapped OPEC member and holder of the world’s biggest oil reserves has been unable to pay foreign partners on some of its projects as revenues slumped along with crude prices and as funds were diverted to social programs and fuel subsidies. PDVSA’s media office in Caracas declined to comment on the possible ONGC deal.

Venezuela, which gets almost all of its export revenue from oil, is among the Organization of Petroleum Exporting Countries that face the greatest risk of instability and production problems in the current oil price environment, according to RBC Helima Croft and Christopher Louney at RBC Capital. The nation “appears poised for a near-term crisis,” they wrote in a Bloomberg Oil Buyer’s Guide.

China Loans

Brent crude, the benchmark for more than half the world’s oil, has fallen more than 50% in the last year as OPEC refrains from trimming output amid a global glut while U.S. production has surged.

Venezuela is already repaying loans outstanding to China with crude. Shipments to China will reach 390,000 bpd at an estimated average price of $51/bbl this year, up from 227,800 bbl at an average price of $88.40 last year, Barclays Plc analysts Alejandro Arreaza and Alejandro Grisanti wrote in an Aug. 3 report.

The 160 sq km (62 square mile) San Cristobal field in the Orinoco heavy-oil belt currently produces about 28,000 bpd, down from a peak of 38,000 bpd, Verma said.

ONGC Videsh also holds an 11% stake in the Carabobo-1 project in Venezuela. The field currently produces about 16,000 bpd and is expected to reach 30,000 bpd by the end of this year and 90,000 bpd by the end of 2017, Oil India Ltd., which holds 3.5% in the project, said this month.